The coffee industry, which shows a steady economic increase in production and consumption every year, has its own value chain. This is the term for all activities that are part of the production of a good or service; we focus on coffee.
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The coffee harvest: the first link in the value chain
The journey of coffee begins with the cultivation of the coffee. The ones who ensure that the coffee trees thrive and have to take into account the environmental factors such as climate and altitude are the coffee farmers. Most of these are very small businesses.
Processing of the coffee beans
Coffee processing is usually done on the farms where the coffee is grown. This is because no complex equipment is required other than a pulping machine. The processing consists in cleaning the different layers that surround the coffee bean. These layers, from outermost to innermost, are:
- The skin
- The pulp
- The mucilage
- The parchment.
Depending on how it is processed, the final taste of the cup of coffee can be affected.
Washing the coffee
This is the world’s most popular method due to its effectiveness and safety. In other words, the risk of the coffee beans being damaged during the process is reduced. The washing process essentially consists of three sub-processes: digestion, washing and drying.
Digestion takes place in a machine, either electrically or manually. The function of this machine is to separate the pulp from the pips that are contained in each red fruit. Thus the coffee beans, of which there are two per fruit, are extracted and the red husk is discarded and used as fertilizer.
This removes the remaining layers, slime and parchment. To do this, the coffee is placed in fermentation containers for a certain period of time.
Typically, this time ranges from 12 to 36 hours, but growers can experiment with varying fermentation times to achieve a specific flavor profile. After fermentation, the coffee is washed with clean water before being dried on patios, tables or raised beds. In small villages in Colombia it can happen that the street in front of the house is used for drying.
This phase is about drying all the coffee beans evenly. They are therefore spread out on a flat surface no more than 3 cm high and exposed to the sun for about 30 hours.
The beans are turned several times a day so that they can dry well on all sides.
Natural coffee processing
This is the oldest procedure, but also the riskiest. The coffee is first dried and then opened.
The big risk is that the natural sugars in coffee can cause over-fermentation during the drying process. If the coffee beans are not turned frequently, mold can form and affect the taste of the coffee.
When the coffee beans have reached a certain moisture level, all outer layers are removed.
Processing of honey coffee
After the digestion of the harvested coffee, the coffee is not stored in fermentation tanks as in washed processing, but is taken directly to the drying area with the mucilage intact. One of the advantages of this type of processing is that it requires less water.
As the coffee dries, the sticky layer on the outside of the beans oxidizes, darkening their color. The beans can take on 3 different colors.
- Yellow indicates the lowest level of oxidation
- gradually the beans can turn red or,
- after a long time, take on a black color.
Because of its appearance, it is called honey coffee after this processing method. The beans then look like they have been dipped in honey.
After working all year round to grow and process coffee, coffee farmers need to prepare the coffee for export.
How is the coffee prepared for export?
In addition to being approved by the government body responsible for customs control or being a member of the national coffee growers ‘ organization that supports exporters, there are also practical aspects to be considered in order for the coffee to be successfully transported to other countries.
Sorting the coffee beans
Depending on the size of the coffee operation, the beans are sorted on the coffee farm or later at a central location and foreign materials are sorted out at the same time. There is a standardized scaling here, which also influences the price.
Storage of coffee
After the coffee has been processed, one has to wait for a transporter to collect the coffee from the farm, the cooperative or the agreed place, depending on the region where it is harvested. During this period, the coffee must be stored in a room with special conditions so that the quality of the coffee is preserved.
The store or warehouse must have the following characteristics:
- Stable humidity level.
- Stable temperature.
- Oxygen levels as low as possible.
- No direct sunlight.
- Free from pests or parasites.
Depending on the conditions in the warehouse, the coffee can be stored for 6 to 11 months.
Packaging of the coffee
The coffee is packed in 70 kg sacks (69 kg of coffee and 1 kg is added to the weight of the sack). 35 kg bags are also available at the buyer’s request.
The bags are marked with the name of the exporting country, an export number and a lot number.
The responsibilities for the packaging and its properties are agreed upon when negotiating the export contract between one or more representatives of the buying/importing company and the selling/exporting company. So e.g. B. the material of the packaging may vary by prior agreement. The most common sacks are made of fique , but plastic sacks also exist.
Airtight and biodegradable methods are now also being developed to ensure the freshness of the beans for as long as possible.
In this phase, a specific coffee load is taken from the warehouses to the loading port, from where it is transported to other countries. Below we will examine the transportation process for exporting from Colombia. This is comparable to other export countries.
Coffee transport in Colombia
In Colombia there are more than 500 points of sale throughout the country, owned by 33 cooperatives, where small and medium-sized coffee farmers have a guarantee of purchasing their production. This is part of Colombia’s fair trade coffee initiatives.
In this way, Colombian coffee farmers have a point of contact close to their farms where they can take their production, which also reduces transport costs.
Who pays the coffee carrier?
Various terms are used in international trade, which are referred to as Incoterms (International Commercial Terms). Different types of contracts are made there, which stipulate which of the two contracting parties is responsible for the costs in the various stages of logistics.
The most common term is FOB (Free on Board). In this case, the seller must assume all packaging, storage and transport costs until the cargo is on board the ship. From that point on, all costs are borne by the buyer.
The coffee farmers, who are not affiliated with any cooperative, pay the tariff set by the transport companies. It is set per tonne and depends on the distance to be covered and the amount of the toll to be paid.
Because of this, it is often cheaper to ship coffee to the port of Buenaventura than to the ports of Cartagena, Santa Marta, or Barranquilla.
What should the coffee exporter do?
Once the cargo is in transit, the exporter or cooperative contacts the National Federation of Coffee Growers (FNC) and the port to which the cargo is to be shipped. This is done to issue a transit guide, which is required for carriage within national territory and to ensure the safety and legality of the goods.
What happens when the coffee arrives at the port?
The cargo must be received at the port by FNC personnel. They are tasked with confirming the documents previously issued, weighing the load to confirm the details in the documents and preparing a cup and quality profile of the coffee to verify that the coffee can be exported as agreed and reported .
However, given the amount of coffee that arrives in all national ports every day, this is not an immediate process. When the shipment arrives, it will be placed on a waiting list so all testing can be done.
If the control lasts more than one day, the cargo will be deposited in Almacenes Generales de Depósito de Café SA ( Almacafe ) warehouses. Normally there is a maximum of 5 days. However, if it takes longer, the seller will be charged a fee in dollars.
Filling the coffee into the container
Once the coffee load has passed all the tests and formalities, it can be loaded into containers.
This work is carried out by the contracted shipping company, which has a specific time to load the containers and leave the port. Time is important as the average charging time for a container of coffee is between 1 and 2 hours . However, if the container cannot be filled, the seller must choose what type of goods to share the space with.
This can be a hassle as coffee, due to its properties, cannot be transported with any other commodity. It is then a race against the time available to the sellers at that point.
What should be considered when transporting coffee by ship?
The greatest care must be taken with the ventilation. The containers are provided with grids or holes z. B. prevent the appearance of fungi due to moisture.
The transport time must be taken into account by the exporter, as mold can form after a few days, depending on the degree of moisture in the coffee.
Finally, the coffee arrives at its destination
Once the coffee is received by the importer in the country of destination, official documents must again be filled out and checked in front of the national customs office, which authorizes the unloading of the goods. Although most imports are made by large companies such as Nestlé or Kraft, small quantities (maximum 70 kg, ie one sack) are also bought.
Can coffee be transported on airplanes?
The short answer is yes.
However, coffee is traded in large quantities at low prices and transport by air freight is usually not economical.
Which countries import coffee?
According to the International Trade Center (ITC), an initiative supported by the United Nations and the World Trade Organization, global coffee purchases are estimated at USD 31 billion in 2020. Interestingly, the top 15 coffee importing countries are all located in the northern hemisphere; Australia, which ranks 15th, is the only southern hemisphere country in this ranking.
Country Percentage of world coffee imports
For practical purposes, we will briefly review some data on coffee imports from the first 4 countries.
Coffee imports into the United States
The country that exported the most coffee to the United States in 2020 was Colombia. The North American country invested USD 1.2 billion. In second place is Brazil, from which $1.16 billion was imported.
Export country in billion USD
The National Coffee Association has the following data showing the impact of the coffee industry on the country:
- Coffee-related economic activity accounts for about 1.6% of the total US gross domestic product.
- In 2015, consumers spent $74.2 billion on coffee.
- The coffee industry is responsible for 1,694,710 jobs in the US economy.
- The coffee industry generates nearly $28 billion in taxes.
Coffee imports to Germany
In total, Germany spent 3.5 billion US dollars on coffee imports in 2020.
Export country in million USD
- Germany is the European country that imports the most coffee.
- According to the Coffee Association, coffee consumption in Germany increased by 1.5% in 2020.
- During the Covid-19 pandemic, consumption of home-roasted coffee increased by around 11%.
Coffee imports in France
France spent a total of $2.9 billion on coffee imports in 2020. Unlike the aforementioned two countries, French imports are concentrated in Switzerland, which has invested $1.4 billion in its coffee.
Export country in million USD
- The French buy coffee 14 times a year on average and 72% say they drink it every day.
- Coffee sales in supermarkets reached 2,794 million euros in France in 2018.
Coffee imports in Italy
Italy will invest USD 1.5 billion in coffee by 2020. The country where the most investments were made was Brazil with USD 395.9 million.
Export country in million USD
- In Italy, the increasing diversification of the coffee industry from bean coffee to standard ground coffee and coffee capsules should support market growth.
- Coffee is drunk at different times of the day, mostly with sugar and without milk, with the exception of cappuccino, macchiato, marocchino and caffè latte.
Switzerland as a coffee exporter
It is striking that Switzerland is one of the most important exporters to the three most important coffee-buying countries (United States, Germany and France). No coffee is grown in Switzerland.
Switzerland invested USD 855.4 million in coffee imports in 2020, but was able to earn more than USD 2 billion from coffee exports to the top three customers.
According to Swiss media SWI swissinfo.ch, around 93% of imports were unroasted coffee beans, while 98% of exports were roasted beans. The Swiss roast gives the product tremendous value. For example, the average price for imported beans is 4 Swiss francs per kilo (US$4.22) and for exported beans it is 30 Swiss francs per kilo (US$31.64).
In addition, most coffee retailers are based in Switzerland, as are large companies such as Nestlé or Nespresso. The export of coffee is far more important than that of foods traditionally associated with Switzerland, such as chocolate or cheese.
After importing the coffee, it is roasted. About 76% of the coffee consumed worldwide is roasted and ground, and of that, about 87% is roasted in a country other than where it is grown .
The darker the roast, the more the aroma of the coffee develops, but a roast that’s too dark will leave a burnt taste.
The roasted coffee market
The global roasted coffee market is expected to reach US$53.74 billion by 2028. The key growth drivers for the market are the growing interest in coffee variations such as flavored coffee and the boom in coffee capsules.
On the other hand, coffee roasting has proliferated with the increasing trend towards “single origin” coffee being served in specialty stores.
- Europe was the largest regional market for roasted coffee in 2020. Developed countries such as Germany, the United Kingdom and France were the main contributors to the region’s high share.
- In addition, coffee is available at affordable prices through online platforms. Two aspects that together promote sales.
In short, the coffee exported from the producing countries to the importing countries is not exclusively intended for consumption. As in the case of Switzerland, a large proportion of this coffee is sold again at up to 10 times the price. In other words: the value chain continues.
Before the coffee beans are packaged for final distribution, they are stored in a strictly controlled environment. Humidity, heat, air and light must be monitored to ensure quality and prevent spoilage. The same applies to storage for export.
Depending on the dynamics of the business, some of the coffee may or may not be ground. Eventually, it needs to be packaged and distributed to local stores.
Freshness is highly valued in the coffee market, so it is common for online shops to offer coffee that is only ground when the order is placed, not beforehand.
Like many other types of packaging, coffee packaging needs to encourage consumers to buy. In addition, it must meet other properties to keep its contents fresh. Basically, they must be sealed vacuum and airtight so that no oxygen can penetrate. However, there are also studies examining whether the combination of a certain color with a certain material can affect the coffee.
Final distribution of coffee
The inventories from the roasters and distribution centers must be passed on to the dealers. The coffee is distributed locally in various ways. These coffee beans are delivered to thousands of coffee shops, restaurants, grocery stores and large retail chains via a transport network.
Larger roasters often sell their coffee through wholesale channels, supplying restaurants, hotels and supermarkets.
McCafe , Tim Hortons, Costa Coffee, Dunkin Donuts and Starbucks are the five largest coffee shop chains in the world.
The coffee value chain consists of many players, each with a very important role to play. A small change can have a big impact on the economic and consumption dynamics of coffee. For example, an incorrectly loaded coffee in a container or an incorrectly filled out document.
We hope you found this information useful to learn more about coffee.